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Australians in Chukotka

It is 12 thousand kilometers from Anadyr to Melbourne. One might ask what do the severe arctic region and a blooming south continent have in common? The link is coal

The Australian coal company Tigers Realm Coal Limited (TIG) is right at home in Chukotka and is doing successful geological exploration in the Bering sea coal-field, while also preparing to produce the first world class coking coal in one of the many established there mining fields. Tigers is participating in the first Far East Economic Forum held in Vladivostok this September.

Australians in Chukotka

Russia has large mining fields, great land territories, however the level of exploration of the mineral resources, especially in the Far East is very low, much lower than in the competitive markets of USA, Canada, Australia and South America. Tigers believes that the Far East has great potential, which is why they are increasing the level of exploration and production. Chukotka seems especially appealing to the Australian coal miners. Not only because it is a promising region in terms of minerals and energy resources, but the greatest advantage of Chukotka is its location with an extensive access to the Pacific Ocean which can enable the development of port infrastructure for the export of goods to the near-by Asian markets. A number of mining projects are already implement-ed. Chukotka has brought considerable investments into the exploration of coking coal not only from TIG, but also billion dollar investments from Canadian company Kinross Gold and Russian Polymetall into the exploration and production of gold. It attracted investors not only with its rich resources, but also with a competitive tax regime and an easy and well-functioning procedure of permits and approvals.

In the last four years, Tigers has invested more than 85 million dollars into the exploration of coking coal fields on the Bering sea coasts, which is enough to export more than 10 million tons of coking coal per year. The majority of invested funds came from Asia and Australia, however the inter-national group was joined by Russian investment funds last year.

The Russian Fund for Direct Investments and Baring Vostok Partners

(BVCP) together with Asian and Australian investors have invested almost 47 out of 55 million dollars into Tigers. These funds were allocated for pre-paring the Bank TEO and the design project for the Phandushkinskoye Polye coking coal fields, which is one of the first opened in North Amaam (a starting Project F), and also for continuing exploration in the Amaam area.

“We are very happy that two distinguished funds, the RFPI and BVCP have demonstrated their faith in the potential of TIG projects by contributing considerable investments to the company. We are grateful that the funds agreed to participate in this project. This confirms our views on our projects as world-class projects and that Russia is an appealing investment project. We see great potential in our future joint development of a larger Amaam field,” says Graig Parry, TIG chief executive officer.

The Chukotka governor Roman Kopin confirmed that the Chukotka region government sees the new investment project as very valuable: “The coal reserves in the Bering Sea cluster aren’t deep and the mining area is located in a geographical proximity to the Pacific Ocean markets, which shows the Bering Sea coal field as one of the most prospective industrial areas of Chukotka.” The head of the region stressed that the regional government supports the Bering Sea project all the way and that the Australian partner is receiving all the necessary assistance in its implementation.

The Austalian company believes that the Russian Far East has every opportunity to become one of the main suppliers of minerals in Asia, and China especially. The latter, nevertheless, continues to look for alter-native feedstock suppliers. The Russian Far East and Chukotka in particular are closely viewed by China as new potential suppliers. The advantage before other countries lies in low expenses and, in comparison with traditional markets, smaller distances. Currently, the volume of trade between the Russian Far East and China is approximately 3 billion dollars per year. Such projects as the export of coking coal from Chukotka can increase this sum multiple times.

The so-called Project F implement-ed in the North Amaam field area is

a launching project for Tigers Realm Coal Limited. The priority interest in this area, as explained by the company, lies in the fact that a great seam of low-sulfur coking coal is explored in that area, which is suitable for cheap quarry processing. Another advantage is proximity to the active Bering seaport.

The project includes a production complex with a coal strip mine, a dressing-and-screening plant with necessary infrastructure; a transport infrastructure with a 35 kilometer year-round road from Project F to the existing Bering seaport (17 kilometers have already been constructed); a coal terminal with coal storage and the modernization of the existing road loading fleet. According to the banking TEO, the Australian company plans to export 1 million tons of low-sulfur coking coal from the Phandushkinskoye Polye per year. The Chukotka coal will be primarily export-ed to China, South Korea and Japan.

The Project F Bering coal-mining field, along with other mining fields, will become part of the first territory for advanced development (TOR) on Chukotka. The TOR regime will decrease the tax on mineral production from 57 Rubles to 34 per 1 ton, the income tax will decrease from 20% to 18% in 2015-2020 and to 8% in 2021-2025. The ESN benefits (the decrease of the total load to 7.5% from the labour compensation fund) are aimed to attract skilled workers.

The results of the 2013-2015 geological exploration showed a considerable growth of indicated and measured resources in tonnage. Mr. Parry is confident that the resources and the volume of cheap quarry processing will increase: “The major part of the coal field today is not yet explored in depth, there is a considerable potential for future increase of resources as the geological exploration continues.” According to his words, the North Amaam resources have increased by 170%, compared to July 2013, and amount to more than 72 million tons.

For the last four years, the recession made a huge impact on the world coal market, but even in such conditions, the coking coal production on the Bering Sea coast promises to be cost efficient. “Of course, now is not the best time to launch a big scale project, but we are inspired by the fact that it’s simple and comprehensive in terms of a technical approach. The Pacific Ocean is near and the coal is right there. You can see everything on a single map page. We are positive,” says Craig Parry, chief executive officer of Tigers Realm Coal Ltd.